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Frequently Asked Questions Insurance

Why would someone waive premium conversion? What are the disadvantages?

For a small number of individuals it may make sense to waive premium conversion. There are two items to consider in making a decision to waive participation and they are:

Flexibility

Under IRS rules, you may reduce coverage (cancel, or change from Self and Family to Self Only) only during an Open Season or at the time of a qualifying life event.

Social Security

Paying your premiums with pre-tax money reduces your earnings reported to the Social Security Administration. When you begin to collect Social Security (normally this occurs at age 65), you may receive a slightly lower Social Security benefit. The extent of the impact will vary depending upon the retirement system you participate in, your salary compared with the Social Security wage base ($87,000 in 2003) and the number of years until you retire.

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